JPMorgan reaches tentative $4.5B settlement

• Settlement covers mortgage-backed securities issued by JPMorgan and Bear Stearns
• It doesn%27t resolve similar claims on securities issued by Washington Mutual
• Deal requires approval by court and securities trusts%27 trustees

NEW YORK — Banking giant JPMorgan Chase has reached a tentative $4.5 billion settlement with 21 major institutional investors over mortgage-backed securities sold to them before the national financial crisis.

Announced Friday, the settlement covers 330 residential mortgage-backed securities trusts issued between 2005 and 2008 by the nation's largest bank and Bear Stearns, the investment bank and brokerage it acquired during the crisis. It does not resolve claims on similar trusts issued by Washington Mutual, the bank JPMorgan also acquired during the crisis.

The institutional investors "have committed to support the settlement and have requested that the trustees accept the settlement offer," JPMorgan said in a statement outlining the agreement.

The statement described the tentative deal, which requires approval by both a court and trustees overseeing the securities, an "important step" in JPMorgan's efforts to resolve similar mortgage-related matters.

"The firm believes it is appropriately reserved for this and any remaining RMBS litigation matters," JPMorgan said.

The tentative deal is unrelated to a potential $13 billion agreement the bank has been negotiating with the U.S. Department of Justice to settle a broad range of issues related to the marketing and sale of mortgages that went bad during the financial crisis. JPMorgan disclosed in a regulatory filing last month that it had put aside $23 billion in litigation reserves to cover settlements.

The settlement offer will remain open until Jan. 15, 2014, but may be extended for an additional 60 days, the bank said. Key terms include:

• Payment of $4.5 billion in cash to settle all claims that have been or could have been made by the 330 trusts.

• Implementation of some servicing changes to mortgages serviced by the bank and overseen by the trusts.

• Continuation of a previously reached forbearance agreement among JPMorgan and the trusts while the trustees analyze the tentative settlement terms.

Shares of JPMorgan ended up 47 cents, 0.9%, to $54.87 in Friday's regular session trading. In after-hours trading, the bank's shares gained 13 cents, 0.3%, to $55, shortly after 5:30 p.m. EST.

Contributing: Associated Press